Markets are changing faster than political nominees. For the moment, a significant high may have occurred in major stock indexes in Mid-July.
The tech heavy NASD has been driving the market advance this year. The NASD closed at 18,647 July 10. It has now fallen about 1,200 points. Pre-market trading Friday had it up. All the Magnificent Seven tech stocks peaked in early July. They have tumbled since. Those stocks led the way up. They are likely leading the way down now. For example Alphabet (Google) has given back in two weeks all the gains recorded from May to that July high. Remember stocks fall seven times faster than they rise. The top tech stocks in the NASD 100 or NDX have given back around 2,000 points since July 10. The Dow Industrials have held up better. But that index is not as top with tech as the NASD group. In similar fashion, the S&P 500 has only fallen from 5,650 to 5,450.
The sell-off Wednesday in the NASD recorded five stocks down for every issue advancing. We will need to see more such declines to finally declare a top. Yet stocks roared back Thursday regaining most of the Wednesday loss. This bull market is not giving up easily.
I noticed the CEO of a major brokerage admitted a correction was at hand but he added the Buffett idea of being bold when others are not. I am guessing that CEO missed the sideways market of 1972-1982 when the averages never regained their 1972 highs. It is said a bear market requires the lack of current participants in that last bear market. As noted, the ‘bear markets’ have been short in 1987, 2000-2002, and 2007-2009. Already bankruptcies are on the rise. Auto companies are scaling back on EV production. Home prices hit new highs but 6.45% mortgage rates may cap that.
Crude oil backs and fills. After hitting a high of $84, yes, the first week of July, prices fell to $77. Thursday was an outside reversal day. This suggests we may be finding support. Gasoline futures have displayed the same chart form. One of my picks is Transocean (RIG). It had a huge up move Thursday with a low of $5.28 and a close of $5.82. It is trading at 48% of book value. This is like having an option which does not expire on oil prices.
Bond prices have trended sideways all year. Fewer comments on them from the FED might help. At this point I doubt a rate cut is in the cards but Powell might do that to keep his job in the new administration.
